Sky Dayton, founder of Earthlink (ELNK ), the No. 3 Internet service provider in the U.S., was installing a Wi-Fi network in his house when he came up with a bold idea: If this wireless standard was spreading around the world, wouldn't there be a role for a service company to aggregate all the hot-spots and turn them into a network, so that users can hook up to Wi-Fi everywhere?
That thought led to Boingo Wireless, Dayton's Santa Monica (Calif.) Wi-Fi company. He wasn't alone -- a year ago, AT&T (T ), Intel (INTC ), and IBM (IBM ) plowed into the same market with a joint venture, Cometa. But in May, with Cometa struggling to build a viable business, the partners pulled the plug. Dayton recently spoke by phone with BusinessWeek's Stephen Baker about the state of the market today. Following are edited excerpts of their conversation:
Q: A year ago, Cometa was expected to dominate the same Wi-Fi access market that Boingo targets. What happened?
A:It's hard to translate success from one industry into success in another. You've got so much inertia in your core business. I think it came down to execution.
Q: Is it easier for startups to navigate these new markets?
A:Whenever there's a disruptive event, it tends to favor new companies that are specialized, that can crawl into new niches that weren't there before. You saw that in ISPs and portals. People expected AT&T to dominate.
Q: What disruptive event is happening now?
A:Wireless is a disruptive event. Wi-Fi is the vanguard of that. I think that wireless is going to go into everything. The Interent is going to go from the wires, the ground, the poles, into the air. The Internet is going to be as ubiquitous as oxygen.
Q: What new services will come out of this?
A:For the first time there's an open standard, a mass-commoditized standard. You'll have Wi-Fi in cameras, iPods, baby toys, cars. It could be anything that has a battery that could use information. There's no reason you couldn't upload things to your kid's Tickle Me Elmo.
Q: What are the pitfalls ahead?
A:Ease of use. We have to continue to make it easier. It has to be simple. Turn it on, and it works. None of this will work if you have to have a propeller hat to put it on. The other problem is fragmentation. You pass the hotel, café, bookstore, and you have three hot spots owned by three companies.
Q: How big is the Boingo Wi-Fi network now?
A:We've got 7,500 locations in 29 countries around the world. That's the tip of the iceberg in terms of potential for hotspots. Eventually, every home and office is going to have Wi-Fi. Every airport, hotel, convention center. As an industry, we're at the very beginning stages of that. We're in 2,000 hotels now. We want to get to 50,000 hotels.
Q: Will Wi-Fi soon be integrated into most cell phones?
A:Cell phones at the end of this year will have integrated Wi-Fi. You cell phone will roam onto Wi-Fi, and your rate will be a lot less. You'll have free calls around the world on DSL and cable. Why not?
Q: Do you see the cell phone turning into a technology Swiss Army knife?
A:The trouble is, you get a houseboat phenomenon. It's something that does two jobs, but isn't particularly good at either one. I'd rather have a tiny cell phone and a PDA that's right-sized.
There's a countervailing force. You can have more and more specialized devices. And then wireless allows them to converge when they need to. Everything's going to be on networks. Even nano devices will be living in this wireless world. They'll be able to grab some Internet to do what they have to do.